3 key rules for trading like Cramer

Trading versus investing. Those terms are kicked around onWall Streetall the time, and if you're new to the market you may think they are interchangeable.

They are not.

Typically trading means moving in and out of positions over a short period of time, sometimes in the same day. An example would be betting on a stock's move immediately after earnings are reported. That's a trade.

Long time fans know that the "Mad Money" host does not typically advocate that home gamers trade. That's the deep end of the pool and something he thinks is better left for the pros.

"I have deliberately skewed the last 500 some odd shows away from trading and toward investing because there are so many more obstacles to trading than investing these days," he said. "You have to watch your positions like a hawk, to the point where it's very hard to do your full-time job and also follow the market."

However, if you're among those Cramer fans who loves the thrill of trading and moving positions in and out, Cramer does have some advice:

1. Make sure you have a catalyst

"I would do no trade if I couldn't explain exactly what the company did and why I liked it and what I expected to happen," he said.

2. Develop an exit point

"Do no buying of anything unless you have an exit strategy in place from the moment you put the trade on," said Cramer. And that doesn't just mean a level at which to stop out if the trade goes against you. It also means knowing at what level you'll ring the register if you have profits.